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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Altria Group | LSE:ALA | London | Ordinary Share | COM STK USD0.333 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 13.28 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Altria Group, Inc.
Regulatory News: Altria Group, Inc. (NYSE: MO):
ALTRIA REPORTS 2007 RESULTS
-- 2007 full-year diluted earnings per share from continuing operations of
$4.33 versus $4.43 in 2006, including the items detailed on Schedule 8
-- Adjusted 2007 full-year diluted earnings per share from
continuing operations up 8.1% to $4.38 versus $4.05 in 2006,
including items detailed in Table 2
-- 2007 fourth-quarter diluted earnings per share from continuing
operations of $1.03 versus $1.14 for the same period in 2006, including
the items detailed on Schedule 7
-- Adjusted 2007 fourth-quarter diluted earnings per share
from continuing operations up 5.3% to $1.00 versus $0.95 for
the same period in 2006, including items detailed in Table 2
PHILIP MORRIS INTERNATIONAL SPIN-OFF EFFECTIVE MARCH 28, 2008
-- Identifies new Board of Directors post-spin for both Altria and PMI
-- Sets spin-off share distribution ratio of one-for-one
-- Announces dividend policies, initial dividend rates and share repurchase
programs
-- Altria dividend policy anticipates payout ratio of 75%
post-spin
-- Altria initial post-spin annualized dividend rate of $1.16
per common share
-- Altria post-spin share repurchase program of $7.5 billion
over 2 years
-- PMI dividend policy anticipates payout ratio of 65% post-
spin
-- PMI initial post-spin annualized dividend rate of $1.84 per
common share
-- PMI post-spin share repurchase program of $13.0 billion
over 2 years
-- To commence tender offer shortly for all outstanding Altria notes
-- Forecasts 2008 earnings per share growth rates
-- Altria 2008 full-year diluted earnings per share from
continuing operations projected to grow approximately 9% to
11% from a 2007 adjusted base of $1.50, excluding PMI, which
will be accounted for as a discontinued operation for the
full-year 2008
-- PMI 2008 full-year diluted earnings per share from
continuing operations projected to grow approximately 12% to
14% at current exchange rates, from a 2007 pro-forma adjusted
base of $2.78
Altria Group, Inc. (NYSE: MO) today issued its 2007 full-year and fourth-quarter
results and announced the spin-off of Philip Morris International Inc. (PMI). In
conjunction with the PMI spin-off, the company identified the new Altria and PMI
Boards of Directors, announced dividend policies, initial dividend rates and
share repurchase programs for each company, and provided separate forecasts for
2008 earnings per share from continuing operations for Altria and PMI.
"Today's announcement underscores our long-term commitment to build shareholder
value," said Louis C. Camilleri, Chairman and Chief Executive Officer of Altria.
"The PMI spin-off and related actions position our international and domestic
tobacco businesses for future success as stand-alone companies with unique and
formidable strengths, including leading brands, strong cash flow, experienced
leadership and solid growth prospects."
"2007 was a watershed year, with strong underlying earnings growth and a number
of strategic actions that further strengthen our tobacco businesses for
long-term growth," Mr. Camilleri said. "While we are by all means not immune to
the current economic uncertainties, we enter 2008 with solid momentum and I am
confident that both Altria and PMI are well positioned to not only weather these
uncertainties, but to deliver strong results this year and beyond."
Conference Call
A conference call hosted by Mr. Camilleri with members of the investment
community and news media will be webcast at 1:00 p.m. New York City Time on
January 30, 2008. Access is available at www.altria.com.
Spin-Off of Philip Morris International (PMI)
The Board of Directors of Altria voted today to authorize the spin-off of 100%
of the shares of Philip Morris International (PMI) to Altria's shareholders.
The distribution will be made on March 28, 2008, to Altria shareholders of
record as of 5:00 p.m. New York City Time on March 19, 2008 (the "record date").
Altria will distribute one share of PMI for every share of Altria common stock
outstanding as of the record date, based on the number of Altria shares
outstanding at 5:00 p.m. New York City Time on that date.
After much consideration, Altria's Board of Directors and management determined
that PMI's separation from Altria will enhance growth and shareholder value by
providing the following benefits:
-- An improved focus on the different market dynamics, competitive
frameworks, challenges and opportunities that Altria and PMI face;
-- A more optimal and efficient capital allocation to enhance shareholder
value, coupled with greater financial flexibility, including an increase
in the combined debt capacity of Altria and PMI;
-- Greater transparency leading to the elimination of the sum-of-the-parts
discount under which Altria's common stock has typically traded;
-- A significant reduction in corporate overheads, including the closure of
Altria's corporate headquarters in New York;
-- The creation of a potential acquisition currency in the form of more
focused equity that neither of Altria's tobacco subsidiaries has had
available prior to the spin-off; and
-- A tighter alignment of compensation and rewards with the performance of
each entity.
Altria has been advised that a "when issued" public market for Altria common
stock will begin some time before the record date on the New York Stock Exchange
(NYSE) and continue through the distribution date under the symbol "MO wi."
"When issued" refers to buying Altria shares without the right to receive PMI
shares. Altria common stock will remain outstanding and will continue to trade
on the NYSE under the symbol "MO."
Any holder of Altria common stock who sells shares of Altria in the "regular
way" market on or before the distribution date will also be selling the right to
receive shares of PMI common stock in the spin-off. Holders of Altria common
stock are encouraged to consult with their financial advisors regarding the
specific implications of selling Altria common stock on or before the
distribution date.
Currently, there is no public market for PMI's common stock. It is anticipated
that PMI will be listed for trading on the NYSE under the symbol "PM." The
company anticipates that trading in PMI common stock will commence on a "when
issued" basis shortly before the record date under the symbol "PM wi."
On the first trading day following the distribution date, "when issued" trading
will end and "regular way" trading will begin for PMI common stock. PMI cannot
predict the trading price for its common stock following the distribution.
Altria has received a private letter ruling from the U.S. Internal Revenue
Service (IRS) and an opinion of counsel that the distribution of PMI common
stock to Altria shareholders qualifies as a tax-free distribution for U.S.
federal income tax purposes.
Non-U.S. shareholders may be subject to tax on the distribution in jurisdictions
other than the U.S. In this regard, Altria has received advice from some foreign
tax authorities and advisors, and anticipates that the distribution will be
tax-free in Canada, Norway and Sweden, but subject to tax in Denmark, France,
Germany, Ireland, Japan, the Netherlands and Switzerland. Altria is awaiting
final advice from the U.K. tax authorities.
It is extremely important that shareholders consult their tax advisors regarding
the particular consequences of the distribution in their situation, including
the applicability and effect of any U.S. federal, state, local and foreign tax
laws.
Registered shareholders in the U.S. and Canada who would like more information
should contact Computershare Trust Company by email at altria@computershare.com
or by phone at 1-866-538-5172. Registered shareholders outside the U.S. and
Canada should call 1-781-575-3572.
If you hold Altria shares through a broker, bank or other nominee, please
contact your financial institution directly or call D.F. King & Co. at
1-800-290-6431.
Additional information including answers to frequently asked questions (FAQs)
will be available in a special section of the Altria website beginning at about
12:00 noon New York City Time today at www.altria.com/pmispinoff.
Board of Directors
Set forth below are the individuals who have agreed to serve on the respective
Board of Directors of Altria and PMI following the spin-off.
Altria's Board of Directors post-spin will include four continuing members from
the current Altria Board of Directors. They are Elizabeth E. Bailey, Robert E.R.
Huntley, Thomas W. Jones and George Munoz. They will be joined by four new
directors: Thomas F. Farrell II, Chairman, President and Chief Executive Officer
of Dominion Resources, Inc., Gerald L. Baliles, Director of the Miller Center of
Public Affairs at the University of Virginia and former Governor of Virginia,
Dinyar S. Devitre, who will step down as Chief Financial Officer of Altria
following the spin-off, and Michael E. Szymanczyk, who will serve as Chairman of
the Board and Chief Executive Officer of Altria.
PMI's Board of Directors post-spin will include five members who will step down
from the current Altria Board of Directors. They are Harold Brown, Mathis
Cabiallavetta, J. Dudley Fishburn, Lucio A. Noto and Stephen M. Wolf. In
addition, Sergio Marchionne, Chief Executive Officer of Fiat S.p.A. and Carlos
Slim Helu will join the PMI Board of Directors at the time of the PMI spin-off,
and Graham Mackay, Chief Executive Officer of SABMiller, has agreed to join the
PMI Board of Directors later in 2008. Louis C. Camilleri will serve as Chairman
of the Board and Chief Executive Officer of PMI following his resignation from
those posts at Altria.
John S. Reed has elected to retire from the Altria Board of Directors. He is one
of the longest-serving members of the Board of Directors and has provided
outstanding leadership throughout his more than 30 years of distinguished
service to the company and its shareholders.
As a result of the PMI spin-off, the date for the Annual Meeting of Shareholders
for Altria has been moved to May 28, 2008 in Richmond, Virginia. Shareholders
who have not already submitted proposals for consideration at the meeting have
until March 28, 2008 to do so, by following the procedures described in the
"2008 Annual Meeting" section on page 66 of Altria's March 23, 2007 proxy
statement.
Dividends
The Board of Directors of Altria today reaffirmed its intention to adjust
Altria's dividend immediately following the distribution of PMI shares so that
Altria shareholders who retain their PMI shares will receive, in the aggregate,
the same annual cash dividend rate of $3.00 per share that existed before the
spin-off.
Altria is expected to pay a dividend at the initial rate of $0.29 per share per
quarter, or $1.16 per common share on an annualized basis. Altria has
established a dividend policy that anticipates a payout ratio of approximately
75% post-spin.
PMI is expected to pay a dividend at the initial rate of $0.46 per share per
quarter, or $1.84 per common share on an annualized basis. PMI has established a
dividend policy that anticipates a payout ratio of approximately 65% post-spin.
Payment of future cash dividends will be at the discretion of the Boards of
Directors of Altria and PMI.
Share Repurchase Programs
The Board of Directors today approved share repurchase programs as follows:
For Altria, a new $7.5 billion two-year share repurchase program was authorized
and is expected to begin in April, after completion of the spin-off.
For PMI, a $13.0 billion two-year share repurchase program was authorized and is
expected to begin in early May, consistent with SEC regulations.
Tender Offer for Altria Notes
Altria will commence a tender offer and consent solicitation shortly in
connection with the spin-off to purchase for cash all of Altria's notes
outstanding, including $2.6 billion of domestic notes denominated in U.S.
dollars and EUR 1.0 billion in euro-denominated notes.
While Altria believes that the proposed distribution is not prohibited by the
indentures, it believes it is desirable to eliminate any uncertainty by amending
the indentures with the consent of note holders.
In order to finance the tender offer, Altria has arranged a $4.0 billion,
364-day credit facility. Subsequent to the spin-off, Altria intends to access
the public debt market to refinance debt incurred in connection with the tender
offer.
PMI Form 10
PMI has filed a Form 10, which includes a preliminary Information Statement,
subject to completion, with the U.S. Securities and Exchange Commission (SEC).
PMI plans to file an updated Form 10 with the SEC on or about February 8, 2008.
The update will include PMI's audited financial statements for 2007,
management's discussion and analysis of operations and a discussion of PMI's
governance and compensation. In addition, the Form 10 will include pro-forma
financial information, which gives effect to the following:
-- In establishing the initial capitalization of the two companies, PMI
will pay to Altria $4.0 billion in dividends, $3.1 billion of which were
paid at the end of 2007;
-- Altria and PMI will reimburse each other for the fair value of stock
awards held by their respective employees. Based on the number of stock
awards outstanding at December 31, 2007 the net payment from Altria to
PMI would be $427 million;
-- Altria will transfer to PMI federal tax contingencies of $97 million;
-- Altria will transfer to PMI balances for pension and other benefits
related to PMI's U.S.-based employees; and
-- PMI will incur the cost of certain headquarters functions that are
currently performed by Altria. The cost of these functions was $92
million in 2007.
PMI plans to file reported and pro-forma amounts as follows:
At December 31, 2007 ($ Billions)
------------------------------------
Reported Pro-forma
Cash $ 1.7 $ 1.3
Total debt (6.3) (6.3)
---------- ------------
Net debt $(4.6) $(5.0)
Stockholders' equity $15.4 $14.7
Following the effectiveness of the Form 10, the company will mail an Information
Statement shortly after the record date to all holders of Altria common stock as
of the record date. The Information Statement will include the procedures by
which the distribution will be effected and other details of the transaction,
together with comprehensive data on PMI.
Investor Presentation
In connection with the spin-off, the company announced that it will hold an
investor presentation on March 11, 2008 in New York City. The presentation will
be webcast beginning at approximately 8:30 a.m. until 1:00 p.m. New York City
Time and will be available at www.altria.com.
Following opening remarks from Louis C. Camilleri, Altria and PMI will give
presentations on their growth strategies, capital structure, cost savings and
productivity initiatives, opportunities and outlook, followed by a
question-and-answer session.
Presenting for Altria will be Michael E. Szymanczyk and David Beran, who will
become Chairman and Chief Executive Officer, and Chief Financial Officer,
respectively, following the spin-off.
Presenting for PMI will be Andre Calantzopoulos and Hermann Waldemer, who will
become Chief Operating Officer and Chief Financial Officer, respectively,
following the spin-off.
2008 Full-Year Forecast for Altria and PMI
Altria (excluding PMI) forecasts that 2008 adjusted full-year diluted earnings
per share from continuing operations will grow to a range of $1.63 to $1.67,
representing a growth rate of approximately 9% to 11% for the full-year 2008
from a base of $1.50 per share in 2007, which is shown in Table 1 below. This
projection reflects a higher effective tax rate, the contribution of income from
recently acquired John Middleton, Inc. and the impact of share repurchases.
Earnings per share growth is expected to be stronger in the second half of 2008.
PMI forecasts adjusted diluted earnings per share from continuing operations at
current exchange rates will increase to a range of $3.11 to $3.17 for the
full-year 2008, reflecting a growth rate of approximately 12% to 14% from the
pro-forma adjusted base of $2.78 per share in 2007, as shown in Table 1.
Table 1 Illustrative EPS for Year Ended Dec. 31,
2007
--------------------------------------------
Altria
Consolidated Altria
Dec. 31, 2007 Ex PMI PMI
------------- ------------- --------------
Reported Diluted EPS $4.33 $1.48 $2.85
Tax items (0.12) (0.09) (0.03)
PMCC recoveries from
airline exposure (0.06) (0.06)
Interest on tax reserve
transfers to Kraft 0.02 0.02
Asset impairment and
exit costs 0.21 0.15 0.06
--------- --------- ---------
Adjusted Diluted EPS $4.38 $1.50 $2.88
Interest on borrowings
to pay $4.0 billion
dividend to Altria (0.07)
Incremental corporate
expenses (0.03)
--------------
Pro-Forma Adjusted See Note
Diluted EPS Below $2.78
Note: While PMI will be required to file these pro-forma 2007 results with the
SEC, Altria is prohibited under current SEC guidelines from imputing interest
income on the transferred cash.
These forecasts exclude the impact of any potential future acquisitions or
divestitures, Altria's gain on the sale of its headquarters in New York City,
charges related to the tender offer for Altria's notes and a number of other
factors, including the items shown above in Table 1. The factors described in
the Forward-Looking and Cautionary Statements section of this release represent
continuing risks to these projections.
2007 FULL-YEAR AND FOURTH-QUARTER RESULTS
As described in "Note 15. Segment Reporting" of Altria's 2006 Annual Report,
management reviews operating companies income, which is defined as operating
income before corporate expenses and amortization of intangibles, to evaluate
segment performance and allocate resources. Management believes it is
appropriate to disclose this measure to help investors analyze business
performance and trends. For a reconciliation of operating companies income to
operating income, see the Condensed Statements of Earnings contained in this
release.
Altria's 2007 reported results and previous-year results reflect Kraft Foods
Inc. (Kraft) as a discontinued operation. As such, net revenues and operating
companies income for Kraft are excluded from the company's results, while the
net earnings impact is included as a single line item.
All references in this news release are to continuing operations, unless
otherwise noted. References to international tobacco market shares are PMI
estimates based on a number of sources.
2007 Diluted EPS From Continuing Operations
For the full year 2007, diluted earnings per share from continuing operations
were down 2.3% to $4.33, including items detailed on Schedule 8, versus $4.43
for the full year 2006. Adjusted for items detailed in Table 2 below, diluted
earnings per share were up 8.1% to $4.38, versus $4.05 for 2006.
Fourth-quarter 2007 diluted earnings per share from continuing operations were
down 9.6% to $1.03, including items detailed on the attached Schedule 7, versus
$1.14 in the year-ago period. Adjusted for items detailed in Table 2,
fourth-quarter 2007 diluted earnings per share were up 5.3% to $1.00 versus
$0.95 in the year-earlier period, which included a $488 million gain from PMI's
reorganization of its tobacco and beer equity holdings in the Dominican
Republic.
Table 2 2007 Results Excluding Items
-------------------------------------------
Full Year Fourth Quarter
---------------------- --------------------
2007 2006 Change 2007 2006 Change
------- ------- ------ ----- ----- ------
Diluted EPS (from
continuing operations for
full year) $ 4.33 $ 4.43 (2.3)% $ 1.03 $1.14 (9.6)%
(Gain) on sales of
businesses (0.15) (0.15)
Asset impairment, exit and
implementation costs 0.21 0.05 0.04 0.02
Italian antitrust charge 0.03
(Recoveries) Provision for
airline industry exposure (0.06) 0.03
Tax items (0.12) (0.35) (0.07) (0.06)
Interest on tax reserve
transfers to Kraft 0.02 0.01
----- ----- ------- ------
Diluted EPS, excluding
above items $ 4.38 $ 4.05 8.1% $ 1.00 $0.95 5.3%
Acquisitions and Divestitures
During the first quarter of 2007, PMI acquired an additional 50.2% stake in
Lakson Tobacco Company Ltd. (Lakson) in Pakistan, and completed a mandatory
tender offer for the remaining shares, which increased PMI's total ownership
interest in Lakson from 40% to approximately 98%, for $383 million.
During the fourth quarter of 2007, PMI completed the acquisition of an
additional 30% stake in its Mexican tobacco business from its joint venture
partner, Grupo Carso, S.A.B. de C.V. PMI previously held a 50% stake in its
Mexican tobacco business and the transaction brought PMI's stake to 80%. Grupo
Carso retains a 20% stake in the business. The transaction had a value of
approximately $1.1 billion.
On December 11, 2007 Altria announced that it had completed the acquisition of
100% of John Middleton, Inc. (Middleton), a leading manufacturer of machine-made
large cigars, from privately held Bradford Holdings, Inc. for $2.9 billion in
cash. The net cost of the acquisition, after deducting approximately $700
million in present value tax benefits arising from the terms of the transaction,
is $2.2 billion. The acquisition was financed with existing cash and is expected
to be modestly accretive to Altria's 2008 earnings and generate an attractive
double-digit economic return. It had no material impact on Altria's 2007
fourth-quarter and full-year earnings.
2007 Full-Year Results
Revenues net of excise taxes increased 5.8% to $38.1 billion for the full-year
2007, driven by increases in both U.S. tobacco and international tobacco.
Operating income increased 2.7% to $13.2 billion, reflecting the items described
in the attached reconciliation on Schedule 6, including higher results from
operations of $512 million and favorable currency of $471 million.
Earnings from continuing operations decreased 1.8% to $9.2 billion, reflecting
the items mentioned above and a higher tax rate in 2007, partially offset by a
decrease in interest expense in 2007 due to lower debt outstanding. The
company's effective tax rate was 31.5% for the full-year 2007 versus 27.2% for
2006. Full-year 2007 results included favorable tax adjustments of $251 million
or $0.12 per share, primarily due to the reversal of tax reserves and other tax
accruals no longer required and the reduction of the German corporate tax rate,
versus favorable tax adjustments of $757 million or $0.35 per share for the
full-year 2006.
Net earnings, including discontinued operations, decreased 18.6% to $9.8
billion, reflecting the Kraft spin-off and other items mentioned above. Diluted
earnings per share, including discontinued operations as detailed on Schedule 4,
decreased 19.1% to $4.62.
2007 Fourth-Quarter Results
Revenues net of excise taxes increased 7.4% to $9.3 billion for the fourth
quarter of 2007, largely driven by international tobacco.
Operating income decreased 6.4% to $3.0 billion, reflecting the items described
in the attached reconciliation on Schedule 3, primarily the impact of the 2006
Dominican Republic transaction, partially offset by higher results from
operations of $143 million and favorable currency of $150 million.
Earnings from continuing operations decreased 9.1% to $2.2 billion, reflecting
the items mentioned above as well as a higher tax rate in the fourth quarter of
2007 versus the year-earlier period, partially offset by lower interest expense.
Net earnings, including discontinued operations, decreased 26.1% to $2.2
billion, reflecting the impact of the Kraft spin-off and the factors mentioned
above. Diluted earnings per share, including discontinued operations as detailed
on Schedule 1, decreased 26.4% to $1.03.
U.S. TOBACCO
2007 Full-Year and Fourth-Quarter Results
Philip Morris USA Inc. (PM USA), Altria's U.S. tobacco business, achieved strong
retail share results for the full year and fourth quarter of 2007, driven by
Marlboro, which increased its retail market share 0.5 points to 41.0% for the
full-year 2007 and 0.8 points to 41.2% in the fourth quarter.
Full-year revenues net of excise taxes increased 1.2% to $15.0 billion for
Altria's U.S. tobacco segment, which includes both PM USA and John Middleton,
Inc. (Middleton). Fourth-quarter revenues net of excise taxes increased 0.5% to
$3.7 billion.
For the full-year 2007, U.S. tobacco operating companies income decreased 6.1%
to $4.5 billion compared to 2006. The decrease was primarily driven by lower
volume, increased resolution expenses, investments in support of PM USA's
smokeless products, $371 million of pre-tax charges in 2007 related to asset
impairment, exit and implementation costs for the previously announced closure
of the Cabarrus cigarette manufacturing facility and a $26 million provision for
the Scott case in Louisiana. Those factors were partially offset by lower
wholesale promotional allowance rates and lower selling, general and
administrative costs. U.S. tobacco operating companies income would have
increased by 1.9% for the full-year 2007 when adjusted for the items shown in
the table below.
In the fourth quarter of 2007, U.S. tobacco operating companies income decreased
3.2% to $1.1 billion compared to the year-earlier period. The decrease was
driven by lower volume, investments in support of PM USA's smokeless products,
increased resolution expenses, $31 million of pre-tax charges in 2007 primarily
related to asset impairment, exit and implementation costs for closure of the
Cabarrus facility and the provision for the Scott case. Those factors were
partially offset by lower wholesale promotional allowance rates and lower
selling, general and administrative costs. U.S. tobacco operating companies
income would have increased 1.0% for the fourth quarter of 2007 compared to the
year-earlier period when adjusted for the items shown in the table below.
U.S. Tobacco 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
------------------------ ------------------------
2007 2006 Change 2007 2006 Change
------- ------- -------- ------- ------- --------
Reported Operating
Companies Income $4,518 $4,812 (6.1)% $1,089 $1,125 (3.2)%
Implementation costs 27 15
Asset impairment and
exit costs related
to Cabarrus plant
closure 344 10 16 10
Provision for Scott
case 26 26
------- ------- ------- -------
Adjusted Operating
Companies Income $4,915 $4,822 1.9% $1,146 $1,135 1.0%
Adjusted OCI Margin* 32.7% 32.5% 0.2pp 31.3% 31.2% 0.1pp
*Margins are calculated as adjusted operating companies income, divided by net
revenues excluding excise taxes.
PM USA's full-year 2007 cigarette shipment volume of 175.1 billion units was
4.6% lower than the previous year, but was estimated to be down approximately
3.6% when adjusted for changes in trade inventories and calendar differences.
For the full year 2007, PM USA estimates a decline of about 4% in total
cigarette industry volume. In the fourth quarter, PM USA's cigarette shipment
volume of 41.7 billion units was 7.8% lower than the prior-year period, but was
estimated to be down approximately 3.3% when adjusted for changes in trade
inventories and calendar differences.
Cigarette volume performance by brand for PM USA is summarized in the table
below:
PM USA Cigarette Volume* by Brand (Billion Units)
----------------------------------------------------------------------
Full Year Fourth Quarter
------------------------ ------------------------
2007 2006 Change** 2007 2006 Change**
------- ------- -------- ------- ------- --------
Marlboro 144.4 150.3 (3.9)% 34.3 37.3 (8.0)%
Parliament 6.0 6.0 0.0% 1.6 1.5 8.0%
Virginia Slims 7.0 7.5 (7.2)% 1.6 1.8 (10.8)%
Basic 13.2 14.5 (8.8)% 3.1 3.5 (11.3)%
------- ------- ------- -------
Focus Brands 170.6 178.3 (4.3)% 40.6 44.1 (7.9)%
Other PM USA 4.5 5.1 (11.9)% 1.1 1.2 (6.7)%
------- ------- ------- -------
Total PM USA 175.1 183.4 (4.6)% 41.7 45.3 (7.8)%
*U.S. unit volume includes units sold as well as promotional units, and excludes
Puerto Rico and U.S. Territories.
**Calculation based on millions of units.
For the full-year 2007, retail share gains for Marlboro and Parliament of 0.5
points and 0.1 point, respectively, were partially offset by losses of 0.1 share
point each for Virginia Slims, Basic and the non-focus brands. In the fourth
quarter of 2007, share gains for Marlboro of 0.8 points were partially offset by
losses of 0.1 share point each for Virginia Slims and Basic, as shown in the
table below:
PM USA Cigarette Retail Share* by Brand
----------------------------------------------------------------------
Full Year Fourth Quarter
-------------------------- --------------------------
2007 2006 Change 2007 2006 Change
-------- -------- -------- -------- -------- --------
Marlboro 41.0% 40.5% + 0.5 pp 41.2% 40.4% + 0.8 pp
Parliament 1.9% 1.8% + 0.1 pp 1.9% 1.9% 0.0 pp
Virginia Slims 2.2% 2.3% - 0.1 pp 2.2% 2.3% - 0.1 pp
Basic 4.1% 4.2% - 0.1 pp 4.0% 4.1% - 0.1 pp
------- ------- ------- -------
Focus Brands 49.2% 48.8% + 0.4 pp 49.3% 48.7% + 0.6 pp
Other PM USA 1.4% 1.5% - 0.1 pp 1.4% 1.4% 0.0 pp
------- ------- ------- -------
Total PM USA 50.6% 50.3% + 0.3 pp 50.7% 50.1% + 0.6 pp
*Retail share performance is based on data from the Information Resources,
Inc.(IRI)/Capstone Total Retail Panel, which is a tracking service that uses a
sample of stores to project market share performance in retail stores selling
cigarettes. The panel was not designed to capture sales through other channels,
including Internet and direct mail.
PM USA is focused on developing new and innovative products that are based on a
deep understanding of adult tobacco consumers. During 2007, PM USA launched
Marlboro Smooth, Marlboro Virginia Blend and six other new cigarette line
extensions. These new products contributed to PM USA's retail share growth for
the year, and in the fourth quarter of 2007 generated more than one share point
of business.
Marlboro Smooth utilizes an innovative menthol application process to create a
uniquely different smoking experience, and helped drive Marlboro's performance
as the industry's fastest-growing menthol brand. Also contributing to Marlboro's
growth was Marlboro Virginia Blend, a single-leaf, non-menthol blend that
reinforces the Marlboro brand's flavor heritage. In addition, PM USA introduced
L&M packings in select geographies, offering a unique, contemporary product in
the discount category.
As part of its adjacency growth strategy to develop new revenue and income
sources for the future, PM USA initiated a test market of Marlboro Snus in the
Dallas/Fort Worth area beginning in August 2007. Due to initial favorable
reaction by adult consumers, wholesalers and retailers to the Marlboro Snus test
market, PM USA announced plans to expand the test market to the Indianapolis
area in early 2008. In addition, PM USA began test marketing Marlboro Moist
Smokeless Tobacco in the Atlanta area in October 2007. Marlboro Moist Smokeless
Tobacco is designed to provide a premium quality product at an attractive price
for adult moist smokeless tobacco consumers. Based on the encouraging initial
consumer and trade response, PM USA is expanding the Marlboro Moist Smokeless
Tobacco test market to include additional counties in the greater Atlanta area
in early 2008.
As previously mentioned, Altria completed the acquisition of Middleton on
December 11, 2007. Middleton's results had no material impact on Altria's
fourth-quarter and full-year earnings. For the full-year 2007, Middleton's
volume, revenues net of excise taxes and operating companies income were in line
with estimates provided when the acquisition was announced on November 1, 2007.
Middleton participates in the machine-made large cigar segment, which had
estimated volume of 5.3 billion units in 2007. The segment is estimated to have
grown volumes at a compound annual rate of approximately 4% over the 2003 to
2007 period.
Retail market share for Middleton's leading brand Black & Mild increased 2.2
share points in 2007 to 25.2% of the machine-made large cigar segment. Retail
share performance is based on data from the most recent IRI Syndicated Reviews
Database (November 2007 year-to-date), which is a tracking service that uses a
sample of stores to project market share performance across multiple product
categories, including cigars.
INTERNATIONAL TOBACCO
2007 Full-Year and Fourth-Quarter Results
Philip Morris International Inc. (PMI), Altria's international tobacco business,
achieved strong income results for the full year and fourth quarter of 2007.
Reported revenues net of excise taxes for the full-year 2007 of $22.8 billion
were up 9.6%. In the fourth quarter, revenues net of excise taxes grew 11.6% to
$5.5 billion.
Operating companies income increased 5.5% to $8.9 billion for the full-year
2007, due primarily to higher pricing, favorable currency of $471 million and
productivity and cost savings, partially offset by the impact of the 2006 gain
on the Dominican Republic transaction and higher marketing and R&D. Operating
companies income grew 12.5% for the full-year 2007 when adjusted for the impact
of the Dominican Republic transaction and other items shown in the table below.
For the fourth quarter, operating companies income decreased 10.0% to $2.0
billion, due primarily to the impact of the Dominican Republic transaction in
the fourth quarter of 2006 as well as unfavorable mix, partially offset by
higher pricing and favorable currency of $150 million. Operating companies
income grew 15.5% for the fourth quarter of 2007 when adjusted for the impact of
the Dominican Republic transaction and other items shown in the table below.
PMI 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------- -----------------------
2007 2006 Change 2007 2006 Change
------- ------- ------ ------- ------- -------
Reported Operating
Companies Income $8,922 $8,458 5.5% $2,010 $2,233 (10.0)%
Divested businesses (51) (6)
Asset impairment and
exit costs 195 126 42 38
Gains on sales of
businesses (488) (488)
Italian antitrust
charge 61
------- ------ ------- -------
Adjusted Operating
Companies Income $9,117 $8,106 12.5% $2,052 $1,777 15.5%
Adjusted OCI Margin* 40.0% 39.0% 1.0pp 37.3% 36.1% 1.2pp
*Margins are calculated as adjusted operating companies income, divided by net
revenues excluding excise taxes.
Cigarette shipment volume, as shown in the table below, increased 2.2% or 18.6
billion units, to 850.0 billion units for the full year 2007, due to the
acquisition of Lakson in Pakistan. Excluding Lakson and the acquisition of local
trademarks in Mexico effective November 1, 2007, cigarette shipments were down
0.7% or 5.6 billion units, due mainly to lower shipments in Germany and Poland
and the unfavorable impact of timing and trade inventory movements, primarily in
Japan and Mexico. Partially offsetting the decline were strong gains in
Argentina, Egypt, Indonesia, Korea and Ukraine, as well as favorable timing in
Italy. Absent acquisitions and the net impact of unfavorable timing and
inventory movements, PMI shipments were essentially flat in 2007.
In the fourth quarter, cigarette shipment volume increased 3.7% or 7.1 billion
units to 198.4 billion units, due to acquisition volume from Lakson and local
trademarks in Mexico, as well as gains in Argentina, Colombia, Egypt, Indonesia,
Korea and Russia and favorable timing in Italy, partially offset by lower volume
in Poland and the United Kingdom and unfavorable timing, primarily in Japan and
Mexico. Excluding the impact of acquisitions in Pakistan and Mexico, cigarette
shipment volume was down 0.4% or 700 million units. Absent the above mentioned
acquisitions and the net impact of unfavorable timing and inventory movements,
PMI shipments rose 1.7% in the fourth quarter, reflecting improving trends and
strengthened business fundamentals.
PMI Cigarette Volume by Segment (Billion Units)
----------------------------------------------------------------------
Full Year Fourth Quarter
------------------- -------------------
2007 2006 Change* 2007 2006 Change*
----- ----- ------- ----- ----- -------
European Union 257.1 259.0 (0.7)% 57.2 57.3 (0.2)%
Eastern Europe, Middle East &
Africa 291.3 288.6 0.9% 65.1 63.9 1.9%
Asia 211.7 194.6 8.8% 51.0 46.5 9.7%
Latin America 89.9 89.2 0.8% 25.1 23.6 6.4%
----- ----- ----- -----
Total PMI 850.0 831.4 2.2% 198.4 191.3 3.7%
*Calculation based on millions of units.
PMI's full-year 2007 market share performance improved versus the year-ago
period in many markets including: Argentina, Australia, Austria, Brazil, Egypt,
Finland, Greece, Hungary, Israel, Italy, Korea, Mexico, the Netherlands, the
Philippines, Portugal, Singapore, Sweden and Ukraine.
PMI's fourth-quarter 2007 market share performance improved versus the year-ago
period in Argentina, Australia, Austria, Brazil, Dominican Republic, Egypt,
Finland, Germany, Greece, Hungary, Israel, Italy, Korea, the Netherlands, Slovak
Republic, Sweden, Switzerland, Taiwan and Ukraine.
For the full-year 2007, Marlboro cigarette shipment volume of 311.2 billion
units was down 1.5%, due mainly to timing in Mexico and unfavorable distributor
inventory movements in Japan, partially offset by gains in Argentina, Bulgaria,
Indonesia, Korea and Russia. Absent timing and inventory distortions in Japan,
Mexico and other markets, Marlboro shipments were down slightly at 0.2% in 2007.
Marlboro market share was up in Argentina, Brazil, Egypt, Greece, Hungary,
Indonesia, Israel, Korea, the Philippines, Poland, Russia and Ukraine.
In the fourth quarter, total Marlboro cigarette shipment volume of 72.4 billion
units was down 1.4%, due primarily to the timing and inventory distortions
mentioned above, partially offset by gains in Argentina, Indonesia and Russia.
Absent timing and inventory distortions in Japan, Mexico and other markets,
Marlboro cigarette shipments were up 1.0% in the fourth quarter of 2007 versus
the year-earlier period.
Shipment volume for PMI's other international brands grew by 1.5% or 4.8 billion
units to 327 billion units for the full-year 2007, driven by gains in
Parliament, Virginia Slims, the Philip Morris brand, Merit, Chesterfield, Bond
Street and Muratti, partially offset by lower volume for L&M and Lark.
During 2007, PMI continued to build strong brand equity through innovation.
Notable new product introductions included Marlboro Filter Plus in Kazakhstan,
Korea, Romania, Russia, Taiwan and Ukraine, and Marlboro kretek in Indonesia.
Marlboro Intense, a new short cigarette developed to deliver more full-flavor
taste, was recently launched nationally in Turkey. In the rapidly growing
menthol segment, Marlboro Fresh Mint and Marlboro Crisp Mint were successfully
launched in Hong Kong, and Marlboro Ice Mint was introduced in Japan. Other
innovations in 2007 included Parliament Platinum in Japan, Virginia Slims Uno in
Russia, Ukraine, Kazakhstan and Greece, Virginia Slims Noire in Japan and a new,
smoother tasting L&M in Russia, Ukraine and Romania. Also, a new packaging
design and communication platform for Chesterfield was recently implemented in
Eastern Europe. In the other tobacco products (OTP) segment in Germany, Next
Tobacco Block and L&M Tobacco Block were introduced in the fine cut category.
EUROPEAN UNION (EU)
2007 Full-Year and Fourth-Quarter Results
In the European Union (EU), operating companies income grew 18.7% to $4.2
billion in 2007, primarily driven by higher pricing and favorable currency of
$417 million. Operating companies income grew 17.1% for the full-year 2007 when
adjusted for the impact of the items shown in the table below.
In the fourth quarter, operating companies income grew 17.4% to $917 million,
driven by higher pricing and favorable currency of $123 million. Operating
companies income grew 18.5% for the quarter when adjusted for the items shown in
the table below.
EU 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------- ------------------
2007 2006 Change 2007 2006 Change
------ ------ ------ ---- ----
Reported Operating Companies
Income $4,173 $3,516 18.7% $917 $781 17.4%
Asset impairment and exit
costs 137 104 36 23
Italian antitrust charge 61
------- ------- ----- -----
Adjusted Operating Companies
Income $4,310 $3,681 17.1% $953 $804 18.5%
Adjusted OCI Margin* 48.9% 46.6% 2.3pp 46.0% 44.8% 1.2pp
*Margins are calculated as adjusted operating companies income, divided by net
revenues excluding excise taxes.
The total cigarette market in the EU declined 0.7% in 2007. PMI's cigarette
shipment volume in the EU of 257.1 billion units was down 0.7% for the full-year
2007, as declines in Germany and Poland and unfavorable distributor inventory
movements in France were partially offset by increased shipments in Hungary and
the Baltics and the impact of favorable inventory movements in Italy. Cigarette
market share in the EU at 39.3% was down 0.1 point for the full-year 2007 versus
2006, primarily due to the Czech Republic. Absent distorted trade inventories in
the Czech Republic, market share in the EU is estimated to have been 39.4% for
the full-year 2007.
PMI's cigarette shipment volume of 57.2 billion units declined 0.2% in the
fourth quarter. The total market in the EU increased 0.2% or 390 million units
versus the fourth quarter of 2006. PMI's market share in the EU at 39.2% was
down 0.3 points. Adjusted for the impact of trade inventories in the Czech
Republic, PMI share in the EU is estimated to have been 39.5% in the fourth
quarter of 2007.
In France, for the full-year 2007 the total market declined 1.5%, due to higher
pricing. PMI's cigarette shipments were down 4.8% versus 2006. Market share for
PMI of 42.4% was down 0.3 points, with Marlboro down 0.7 share points to 30.2%,
reflecting the temporary impact of crossing the EUR 5.00 per pack threshold. In
the mid-price segment, the Philip Morris brand gained 0.3 points to 6.2%. PMI
achieved sequential improvement in market share every month since September.
In Germany, the cigarette market declined 4.0% for the full-year 2007, due
mainly to the tax-driven price increase in October 2006. PMI's in-market
cigarette sales were down 5.0% and market share of 36.5% declined 0.4 points due
to lower Marlboro share, partially offset by share gains for L&M. PMI's
cigarette shipments were down 4.6% versus 2006. Market share in the fourth
quarter was up 1.4 points to 37.6%.
In Italy, the total market was down 1.1% for the full-year 2007, while PMI's
in-market sales rose 0.4%. PMI's cigarette market share of 54.6% grew 0.8
points, driven by Chesterfield and Merit. Share for Marlboro in Italy of 22.8%
was essentially unchanged. PMI's full-year 2007 cigarette shipments were up
2.9%, due mainly to favorable timing of shipments compared to 2006.
In Poland, consumer price sensitivity within the low-price segment following
significant tax-driven price increases led to a total cigarette market decline
of 3.5% for the full-year 2007, as consumers switched to other tobacco products.
PMI's market share was down 1.0 point to 39.0%, primarily reflecting share
declines for its low-price and local 70mm brands. However, Marlboro market share
rose 0.4 points to 8.5%. PMI's cigarette shipments in Poland declined 6.0% for
the full-year 2007, but profits more than doubled due to improved pricing and
product mix.
In Spain, the total cigarette market was down 1.2% for the full-year 2007, while
PMI's market share of 32.1% was down slightly. Marlboro share declined 0.6
points to 16.5%, partially offset by gains for Chesterfield, L&M and the Philip
Morris brand. Cigarette shipments in Spain rose 0.7% in 2007 and operating
companies income climbed close to 40%.
EASTERN EUROPE, MIDDLE EAST & AFRICA (EEMA)
2007 Full-Year and Fourth-Quarter Results
In Eastern Europe, Middle East & Africa (EEMA), PMI's operating companies income
increased 17.5% to $2.4 billion for the full year 2007, due mainly to higher
pricing, improved volume/mix and favorable currency of $90 million. Operating
companies income grew 18.0% for the full year 2007 when adjusted for the impact
of the items shown in the table below.
In the fourth quarter, operating companies income for the segment increased
21.1% to $516 million, due mainly to higher pricing, lower costs and favorable
currency of $25 million. Operating companies income grew 20.6% for the fourth
quarter of 2007 when adjusted for the impact of the items shown in the table
below.
EEMA 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------- ------------------
2007 2006 Change 2007 2006 Change
------ ------ ------ ---- ---- ------
Reported Operating Companies
Income $2,427 $2,065 17.5% $516 $426 21.1%
Asset impairment and exit
costs 12 2 2
------- ------- ----- -----
Adjusted Operating Companies
Income $2,439 $2,067 18.0% $516 $428 20.6%
Adjusted OCI Margin* 38.4% 36.9% 1.5pp 34.4% 32.8% 1.6pp
*Margins are calculated as adjusted operating companies income, divided by net
revenues excluding excise taxes.
Full-year 2007 cigarette shipment volume of 291.3 billion units was up 0.9% as
gains in Algeria, Bulgaria, Egypt and Ukraine were partially offset by declines
in Romania, Russia, Serbia and Turkey. In the fourth quarter of 2007, cigarette
shipment volume of 65.1 billion units was up 1.9%, driven by solid gains in
Eastern Europe, Turkey and the Middle East, partially offset by lower duty-free
shipments.
In Egypt, PMI's cigarette shipments rose 25.6% for the full-year 2007, while
market share advanced 1.9 points to 12.0%, driven by Marlboro, L&M and Merit.
In Russia, shipment volume declined 2.0% for the full-year 2007, as lower volume
for L&M was partially offset by the continued growth of higher-margin brands,
including Marlboro, Parliament, Chesterfield and Muratti. PMI market share of
26.6% was unchanged. Improved brand mix and better pricing resulted in income
growth of 24%. In September 2007, PMI replaced the entire L&M brand family with
a completely new, smoother tasting product line-up in response to changing adult
consumer preferences.
In Turkey, the total market was down slightly by 0.4% for the full-year 2007
versus 2006, while PMI's market share declined 2.1 points to 40.4%, due mainly
to the decline of lower-margin brands in PMI's portfolio. Although PMI's
shipments were down 1.6%, income grew in the double digits, driven by strong
pricing and growth in premium brand volume.
In Ukraine, shipments grew 4.7% for the full-year 2007 and market share rose 0.8
points to 33.9%, driven by adult consumer uptrading to Marlboro, Parliament and
Chesterfield. Profit growth was robust at more than 25%.
ASIA
2007 Full-Year and Fourth-Quarter Results
In Asia, operating companies income decreased 3.6% to $1.8 billion for the
full-year 2007, primarily due to lower volume in Japan and unfavorable currency
of $36 million, partially offset by favorable pricing. Operating companies
income decreased 3.1% for the full-year 2007 when adjusted for the impact of the
items shown in the table below.
In the fourth quarter, operating companies income decreased 5.6% to $390
million, primarily due to lower volume in Japan, partially offset by favorable
pricing. Operating companies income decreased 6.8% for the fourth quarter of
2007 when adjusted for the impact of the items shown in the table below.
Asia 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------------- ----------------------------
2007 2006 Change 2007 2006 Change
--------- --------- -------- --------- --------- --------
Reported
Operating
Companies
Income $1,802 $1,869 (3.6)% $390 $413 (5.6)%
Asset
impairment
and exit
costs 28 19 6 12
--------- --------- --------- ---------
Adjusted
Operating
Companies
Income $1,830 $1,888 (3.1)% $396 $425 (6.8)%
Adjusted OCI
Margin* 32.4% 34.1% (1.7) pp 29.2% 31.6% (2.4) pp
*Margins are calculated as adjusted operating companies income, divided by net
revenues excluding excise taxes.
PMI's full-year 2007 cigarette shipments of 211.7 billion units rose 8.8%,
reflecting the acquisition of Lakson in Pakistan and higher volume in Indonesia
and Korea, partially offset by a decline in Japan. Excluding the Lakson volume,
shipments were down 3.2% or 6.2 billion units, reflecting the negative impact of
inventory movements and the lower in-market sales in Japan in the fourth quarter
of 2007. In the fourth quarter of 2007, PMI's cigarette shipment volume of 51.0
billion units rose 9.7%, due to acquisition volume in Pakistan and gains in
Indonesia, Korea and Thailand, partially offset by Japan. Excluding acquisition
volume in Pakistan, volume was down 5.1%.
In Indonesia, the total cigarette market was up 3.9% for the full-year 2007. PMI
market share was down slightly to 28.0%, reflecting the share decline of A Mild
and Dji Sam Soe, due to a temporary stick-price disadvantage versus competitive
brands, partially offset by the growth of Marlboro, which gained 0.4 points to
4.0%. PMI's cigarette shipments grew 2.8% while Marlboro shipments rose 14.7%,
driven by focused marketing and improved distribution and the July 2007 Marlboro
kretek launch.
In Japan, the total cigarette market declined 4.8% or 13.0 billion units for the
full-year 2007, due primarily to the impact of the 2006 mid-year excise
tax-driven price increase. PMI's in-market sales were down 6.2% and market share
declined 0.4 points to 24.3%, due mainly to Lark. Marlboro's share at 9.9% was
flat for the full-year 2007, but up 0.2 points in the fourth quarter of 2007
versus the year-earlier period. For the full-year 2007, cigarette shipment
volume was down 12.6%, reflecting lower in-market sales and a reduction in
distributor inventory durations at year-end 2007 versus 2006.
In Korea, the total market was up 4.6% for the full-year 2007. PMI's shipments
rose 20.3% and market share increased 1.3 points to 9.9%. The share increase was
driven by Marlboro, Parliament and Virginia Slims and benefited from recent new
line extensions, including Marlboro Filter Plus. Income was significantly higher
in 2007.
LATIN AMERICA
2007 Full-Year and Fourth-Quarter Results
In Latin America, operating companies income decreased 48.4% to $520 million in
2007, due mainly to the impact of the 2006 Dominican Republic transaction,
partially offset by higher pricing in 2007. Operating companies income increased
14.5% for the full-year 2007 when adjusted for the impact of the items shown in
the table below.
In the fourth quarter of 2007, operating companies income decreased 69.5% to
$187 million, due mainly to the impact of the 2006 Dominican Republic
transaction in the year-earlier period, partially offset by higher pricing.
Operating companies income increased 55.8% for the fourth quarter of 2007 when
adjusted for the impact of the items shown in the table below.
Latin America 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------------- ----------------------------
2007 2006 Change 2007 2006 Change
--------- --------- -------- --------- --------- --------
Reported
Operating
Companies
Income $520 $1,008 (48.4)% $187 $613 (69.5)%
Divested
businesses (51) (6)
Asset
impairment
and exit
costs 18 1 1
Gains on
sales of
businesses (488) (488)
--------- --------- --------- ---------
Adjusted
Operating
Companies
Income $538 $470 14.5% $187 $120 55.8%
Adjusted OCI
Margin* 27.0% 26.8% 0.2pp 32.7% 24.7% 8.0pp
*Margins are calculated as adjusted operating companies income, divided by net
revenues excluding excise taxes.
Full-year 2007 cigarette shipment volume of 89.9 billion units was up 0.8%, as
higher volume in Argentina more than offset declines in Mexico and the Dominican
Republic. Fourth quarter 2007 cigarette shipment volume of 25.1 billion units
was up 6.4%, driven by gains in Argentina, Brazil, Colombia and acquisition
volume in Mexico. Excluding local brands acquired in Mexico, full-year 2007
volume was down 0.3%, while fourth-quarter 2007 volume was up 2.5%.
In Argentina, the total cigarette market grew 3.0% for the full-year 2007. PMI's
market share increased 2.6 points to a record 68.9%, driven by Marlboro and the
Philip Morris brand. PMI shipments grew 7.1% and profits advanced more than 40%.
In Mexico, the total market declined 6.3% for the full-year 2007, due to lower
consumption following the price increases in January and October 2007, as well
as an unfavorable comparison with the prior year, which included trade purchases
in advance of the January 2007 tax-driven price increase. PMI's market share
gain of 0.8 points to a record 64.3% was fueled by Benson & Hedges and
Delicados. Marlboro's share at 47.7% was flat versus the prior year.
FINANCIAL SERVICES
2007 Full-Year and Fourth-Quarter Results
Philip Morris Capital Corporation (PMCC) reported operating companies income of
$421 million for the full-year 2007 and $89 million for the fourth quarter of
2007, versus $176 million for the full-year 2006 and $38 million for the fourth
quarter of 2006. Results for the full-year 2007 include cash recoveries of $214
million related to certain airline leases previously written down, versus a
provision of $103 million in 2006. Results for the fourth quarter of 2007
reflect higher asset management gains versus the same period in 2006.
Consistent with its strategic shift in 2003, PMCC is focused on managing its
existing portfolio of finance assets in order to maximize gains and generate
cash flow from asset sales and related activities. PMCC is no longer making new
investments and expects that its operating companies income will fluctuate over
time as investments mature or are sold.
Altria Group, Inc. Profile
As of December 31, 2007, Altria owned 100% of Philip Morris International Inc.,
Philip Morris USA Inc., John Middleton, Inc. and Philip Morris Capital
Corporation, and approximately 28.6% of SABMiller plc. The brand portfolio of
Altria's tobacco operating companies includes such well-known names as Marlboro,
L&M, Parliament, Virginia Slims and Black & Mild. Altria recorded 2007 net
revenues from continuing operations of $73.8 billion.
Trademarks and service marks mentioned in this release are the registered
property of, or licensed by, the subsidiaries of Altria Group, Inc.
A complete copy of Altria's audited 2007 financial statements will be available
through Altria's website after they are filed with the Securities and Exchange
Commission on or about February 4, 2008. If you do not have Internet access but
would like to receive a copy of the 2007 audited financial statements for
Altria, please call toll-free (800) 367-5415 in the U.S. and Canada to request a
copy.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other
forward-looking statements that involve a number of risks and uncertainties and
are made pursuant to the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. The following important factors could cause
actual results and outcomes to differ materially from those contained in such
forward-looking statements.
Altria Group, Inc.'s tobacco subsidiaries (Philip Morris USA Inc., John
Middleton, Inc. and Philip Morris International Inc.) are subject to intense
price competition; changes in consumer preferences and demand for their
products; fluctuations in levels of customer inventories; the effects of foreign
economies and local economic and market conditions; unfavorable currency
movements and changes to income tax laws. Their results are dependent upon their
continued ability to promote brand equity successfully; to anticipate and
respond to new consumer trends; to develop new products and markets and to
broaden brand portfolios in order to compete effectively with lower-priced
products; and to improve productivity.
Altria Group, Inc.'s tobacco subsidiaries continue to be subject to litigation,
including risks associated with adverse jury and judicial determinations, and
courts reaching conclusions at variance with the company's understanding of
applicable law and bonding requirements in the limited number of jurisdictions
that do not limit the dollar amount of appeal bonds; legislation, including
actual and potential excise tax increases; discriminatory excise tax structures;
increasing marketing and regulatory restrictions; the effects of price increases
related to excise tax increases and concluded tobacco litigation settlements on
consumption rates and consumer preferences within price segments; health
concerns relating to the use of tobacco products and exposure to environmental
tobacco smoke; governmental regulation; privately imposed smoking restrictions;
and governmental and grand jury investigations.
Altria Group, Inc. and its subsidiaries are subject to other risks detailed from
time to time in its publicly filed documents, including its Annual Report on
Form 10-K for the period ended December 31, 2006 and Quarterly Report on Form
10-Q for the period ended September 30, 2007. Altria Group, Inc. cautions that
the foregoing list of important factors is not complete and does not undertake
to update any forward-looking statements that it may make.
ALTRIA GROUP, INC. Schedule 1
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended December 31,
(in millions, except per share data)
(Unaudited)
2007 2006 % Change
-----------------------------
Net revenues $ 18,229 $ 16,027 13.7 %
Cost of sales 4,048 3,836 5.5 %
Excise taxes on products (*) 8,976 7,413 21.1 %
-------------------
Gross profit 5,205 4,778 8.9 %
Marketing, administration and research
costs 1,959 1,822
Asset impairment and exit costs 58 48
(Gains) on sales of businesses - (488)
-------------------
Operating companies income 3,188 3,396 (6.1)%
Amortization of intangibles 10 6
General corporate expenses 95 139
Asset impairment and exit costs 47 7
-------------------
Operating income 3,036 3,244 (6.4)%
Interest and other debt expense, net 28 42
-------------------
Earnings from continuing operations
before income taxes, and equity
earnings and minority interest, net 3,008 3,202 (6.1)%
Provision for income taxes 862 860 0.2 %
-------------------
Earnings from continuing operations
before equity earnings and minority
interest, net 2,146 2,342 (8.4)%
Equity earnings and minority interest,
net 42 64
-------------------
Earnings from continuing operations 2,188 2,406 (9.1)%
Earnings from discontinued operations,
net of income taxes and minority
interest - 553
-------------------
Net earnings $ 2,188 $ 2,959 (26.1)%
===================
Per share data:
Basic earnings per share from continuing
operations $ 1.04 $ 1.15 (9.6)%
Basic earnings per share from
discontinued operations $ - $ 0.26
-------------------
Basic earnings per share $ 1.04 $ 1.41 (26.2)%
===================
Diluted earnings per share from
continuing operations $ 1.03 $ 1.14 (9.6)%
Diluted earnings per share from
discontinued operations $ - $ 0.26
-------------------
Diluted earnings per share $ 1.03 $ 1.40 (26.4)%
===================
Weighted average number of
shares outstanding - Basic 2,104 2,092 0.6 %
- Diluted 2,119 2,110 0.4 %
(*) The segment detail of excise taxes on products sold is shown in
the Net Revenues page.
ALTRIA GROUP, INC. Schedule 2
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended December 31,
(in millions)
(Unaudited)
Net Revenues US
tobacco European Union EEMA Asia
------------------------------------------
2007 $4,487 $ 6,429 $ 2,944 $ 2,748
2006 4,536 5,504 2,256 2,475
% Change (1.1)% 16.8% 30.5% 11.0%
Reconciliation:
---------------------------
For the quarter ended
December 31, 2006 $4,536 $ 5,504 $ 2,256 $ 2,475
Divested businesses - 2006 - - - -
Divested businesses - 2007 - - - -
Acquired businesses 15 - - 76
Currency - 686 307 108
Operations (64) 239 381 89
------------------------------------------
For the quarter ended
December 31, 2007 $4,487 $ 6,429 $ 2,944 $ 2,748
==========================================
(*) The detail of excise
taxes on products sold is
as follows:
2007 $ 826 $ 4,358 $ 1,445 $ 1,391
2006 $ 893 $ 3,710 $ 953 $ 1,132
2007 Currency increased
international tobacco
excise taxes $ - $ 472 $ 196 $ 78
Net Revenues Total
Latin International Financial
America tobacco services Total
------------------------------------------
2007 $1,527 $ 13,648 $ 94 $18,229
2006 1,211 11,446 45 16,027
% Change 26.1% 19.2% +100% 13.7%
Reconciliation:
---------------------------
For the quarter ended
December 31, 2006 $1,211 $ 11,446 $ 45 $16,027
Divested businesses - 2006 - - - -
Divested businesses - 2007 - - - -
Acquired businesses 32 108 - 123
Currency 43 1,144 - 1,144
Operations 241 950 49 935
------------------------------------------
For the quarter ended
December 31, 2007 $1,527 $ 13,648 $ 94 $18,229
==========================================
(*) The detail of excise
taxes on products sold is
as follows:
2007 $ 956 $ 8,150 $ 8,976
2006 $ 725 $ 6,520 $ 7,413
2007 Currency increased
international tobacco
excise taxes $ 26 $ 772 $ 772
ALTRIA GROUP, INC. Schedule 3
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended December 31,
(in millions)
(Unaudited)
Operating Companies
Income US tobacco European Union EEMA Asia
--------------------------------------------
2007 $ 1,089 $ 917 $ 516 $ 390
2006 1,125 781 426 413
% Change (3.2)% 17.4% 21.1% (5.6)%
Reconciliation:
-------------------------
For the quarter ended
December 31, 2006 $ 1,125 $ 781 $ 426 $ 413
Divested businesses -
2006 - - - -
Italian antitrust charge
- 2006 - - - -
Asset impairment and exit
costs - 2006 10 23 2 12
Gains on sales of
businesses - 2006 - - -
Provision for airline
industry exposure - 2006 - - - -
--------------------------------------------
10 23 2 12
--------------------------------------------
Divested businesses -
2007 - - - -
Asset impairment and exit
costs - 2007 (16) (36) - (6)
Implementation costs -
2007 (15) - - -
Recoveries from airline
industry exposure - 2007 - - - -
--------------------------------------------
(31) (36) - (6)
--------------------------------------------
Acquired businesses 7 - - 3
Currency - 123 25 -
Operations (22) 26 63 (32)
--------------------------------------------
For the quarter ended
December 31, 2007 $ 1,089 $ 917 $ 516 $ 390
============================================
Operating Companies Total
Income Latin International Financial
America tobacco services Total
--------------------------------------------
2007 $ 187 $ 2,010 $ 89 $3,188
2006 613 2,233 38 3,396
% Change (69.5)% (10.0)% +100% (6.1)%
Reconciliation:
-------------------------
For the quarter ended
December 31, 2006 $ 613 $ 2,233 $ 38 $3,396
Divested businesses -
2006 (6) (6) - (6)
Italian antitrust charge
- 2006 - - - -
Asset impairment and exit
costs - 2006 1 38 - 48
Gains on sales of
businesses - 2006 (488) (488) - (488)
Provision for airline
industry exposure - 2006 - - - -
--------------------------------------------
(493) (456) - (446)
--------------------------------------------
Divested businesses -
2007 - - - -
Asset impairment and exit
costs - 2007 - (42) - (58)
Implementation costs -
2007 - - - (15)
Recoveries from airline
industry exposure - 2007 - - - -
--------------------------------------------
- (42) - (73)
--------------------------------------------
Acquired businesses 8 11 - 18
Currency 2 150 - 150
Operations 57 114 51 143
--------------------------------------------
For the quarter ended
December 31, 2007 $ 187 $ 2,010 $ 89 $3,188
============================================
ALTRIA GROUP, INC. Schedule 4
and Subsidiaries
Condensed Statements of Earnings
For the Twelve Months Ended December 31,
(in millions, except per share data)
(Unaudited)
2007 2006 % Change
---------------------------
Net revenues $73,801 $67,051 10.1 %
Cost of sales 16,547 15,540 6.5 %
Excise taxes on products (*) 35,750 31,083 15.0 %
-----------------
Gross profit 21,504 20,428 5.3 %
Marketing, administration and research
costs 7,318 7,170
Italian antitrust charge - 61
Asset impairment and exit costs 539 136
(Gains) on sales of businesses - (488)
(Recoveries) Provision (from) for airline
industry exposure (214) 103
-----------------
Operating companies income 13,861 13,446 3.1 %
Amortization of intangibles 28 23
General corporate expenses 487 494
Asset impairment and exit costs 111 42
-----------------
Operating income 13,235 12,887 2.7 %
Interest and other debt expense, net 215 367
-----------------
Earnings from continuing operations before
income taxes, equity earnings and
minority interest, net 13,020 12,520 4.0 %
Provision for income taxes 4,096 3,400 20.5 %
-----------------
Earnings from continuing operations before
equity earnings and minority interest,
net 8,924 9,120 (2.1)%
Equity earnings and minority interest, net 237 209
-----------------
Earnings from continuing operations 9,161 9,329 (1.8)%
Earnings from discontinued operations, net
of income taxes and minority interest 625 2,693
-----------------
Net earnings $ 9,786 $12,022 (18.6)%
=================
Per share data (**):
Basic earnings per share from continuing
operations $ 4.36 $ 4.47 (2.5)%
Basic earnings per share from discontinued
operations $ 0.30 $ 1.29
-----------------
Basic earnings per share $ 4.66 $ 5.76 (19.1)%
=================
Diluted earnings per share from continuing
operations $ 4.33 $ 4.43 (2.3)%
Diluted earnings per share from
discontinued operations $ 0.29 $ 1.28
-----------------
Diluted earnings per share $ 4.62 $ 5.71 (19.1)%
=================
Weighted average number of
shares outstanding - Basic 2,101 2,087 0.7 %
- Diluted 2,116 2,105 0.5 %
(*) The segment detail of excise taxes on products sold is shown in
the Net Revenues page.
(**) Basic and diluted earnings per share are computed for each of the
periods presented.
Accordingly, the sum of the quarterly earnings per share amounts may
not agree to the year-to-date amounts.
ALTRIA GROUP, INC. Schedule 5
and Subsidiaries
Selected Financial Data by Business Segment
For the Twelve Months Ended December 31,
(in millions)
(Unaudited)
Net Revenues US tobacco European Union EEMA Asia
--------------------------------------------
2007 $ 18,485 $ 26,682 $12,149 $11,099
2006 18,474 23,752 9,972 10,142
% Change 0.1% 12.3% 21.8% 9.4%
Reconciliation:
-------------------------
For the twelve months
ended December 31, 2006 $ 18,474 $ 23,752 $ 9,972 $10,142
Divested businesses -
2006 - - - -
Divested businesses -
2007 - - - -
Acquired businesses 15 - - 227
Currency - 2,306 760 371
Operations (4) 624 1,417 359
--------------------------------------------
For the twelve months
ended December 31, 2007 $ 18,485 $ 26,682 $12,149 $11,099
============================================
(*) The detail of excise
taxes on products sold
is as follows:
2007 $ 3,452 $ 17,869 $ 5,801 $ 5,452
2006 $ 3,617 $ 15,859 $ 4,365 $ 4,603
2007 Currency increased
international tobacco
excise taxes $ - $ 1,558 $ 439 $ 296
Net Revenues Total
Latin International Financial
America tobacco services Total
--------------------------------------------
2007 $ 5,166 $ 55,096 $ 220 $73,801
2006 4,394 48,260 317 67,051
% Change 17.6% 14.2% (30.6)% 10.1%
Reconciliation:
-------------------------
For the twelve months
ended December 31, 2006 $ 4,394 $ 48,260 $ 317 $67,051
Divested businesses -
2006 - - - -
Divested businesses -
2007 - - - -
Acquired businesses 143 370 - 385
Currency 76 3,513 - 3,513
Operations 553 2,953 (97) 2,852
--------------------------------------------
For the twelve months
ended December 31, 2007 $ 5,166 $ 55,096 $ 220 $73,801
============================================
(*) The detail of excise
taxes on products sold
is as follows:
2007 $ 3,176 $ 32,298 $35,750
2006 $ 2,639 $ 27,466 $31,083
2007 Currency increased
international tobacco
excise taxes $ 42 $ 2,335 $ 2,335
ALTRIA GROUP, INC. Schedule 6
and Subsidiaries
Selected Financial Data by Business Segment
For the Twelve Months Ended December 31,
(in millions)
(Unaudited)
Operating Companies
Income US tobacco European Union EEMA Asia
---------------------------------------------
2007 $ 4,518 $ 4,173 $ 2,427 $ 1,802
2006 4,812 3,516 2,065 1,869
% Change (6.1)% 18.7% 17.5% (3.6)%
Reconciliation:
------------------------
For the twelve months
ended December 31, 2006 $ 4,812 $ 3,516 $ 2,065 $ 1,869
Divested businesses -
2006 - - - -
Italian antitrust charge
- 2006 - 61 - -
Asset impairment and
exit costs - 2006 10 104 2 19
Gains on sales of
businesses - 2006 - - - -
Provision for airline
industry exposure -
2006 - - - -
---------------------------------------------
10 165 2 19
---------------------------------------------
Divested businesses -
2007 - - - -
Asset impairment and
exit costs - 2007 (344) (137) (12) (28)
Implementation costs -
2007 (27) - - -
Recoveries from airline
industry exposure -
2007 - - - -
---------------------------------------------
(371) (137) (12) (28)
---------------------------------------------
Acquired businesses 7 (2) - 12
Currency - 417 90 (36)
Operations 60 214 282 (34)
---------------------------------------------
For the twelve months
ended December 31, 2007 $ 4,518 $ 4,173 $ 2,427 $ 1,802
=============================================
Operating Companies Total
Income Latin International Financial
America tobacco services Total
---------------------------------------------
2007 $ 520 $ 8,922 $ 421 $13,861
2006 1,008 8,458 176 13,446
% Change (48.4)% 5.5% +100% 3.1%
Reconciliation:
------------------------
For the twelve months
ended December 31, 2006 $ 1,008 $ 8,458 $ 176 $13,446
Divested businesses -
2006 (51) (51) - (51)
Italian antitrust charge
- 2006 - 61 - 61
Asset impairment and
exit costs - 2006 1 126 - 136
Gains on sales of
businesses - 2006 (488) (488) - (488)
Provision for airline
industry exposure -
2006 - - 103 103
---------------------------------------------
(538) (352) 103 (239)
---------------------------------------------
Divested businesses -
2007 - - - -
Asset impairment and
exit costs - 2007 (18) (195) - (539)
Implementation costs -
2007 - - - (27)
Recoveries from airline
industry exposure -
2007 - - 214 214
---------------------------------------------
(18) (195) 214 (352)
---------------------------------------------
Acquired businesses 6 16 - 23
Currency - 471 - 471
Operations 62 524 (72) 512
---------------------------------------------
For the twelve months
ended December 31, 2007 $ 520 $ 8,922 $ 421 $13,861
=============================================
ALTRIA GROUP, INC. Schedule 7
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Quarters Ended December 31,
($ in millions, except per share data)
(Unaudited)
Diluted
Net Earnings E.P.S.
------------ ------------
2007 Continuing Earnings $ 2,188 $ 1.03
2006 Continuing Earnings $ 2,406 $ 1.14
% Change (9.1)% (9.6)%
Reconciliation:
-------------------------------------------
2006 Continuing Earnings $ 2,406 $ 1.14
2006 Asset impairment and exit costs 38 0.02
2006 Gains on sales of businesses (317) (0.15)
2006 Tax items (126) (0.06)
------------ ------------
(405) (0.19)
------------ ------------
2007 Asset impairment, exit and
implementation costs (85) (0.04)
2007 Tax items 154 0.07
------------ ------------
69 0.03
------------ ------------
Currency 104 0.05
Change in shares - -
Change in tax rate (104) (0.05)
Operations 118 0.05
------------ ------------
2007 Continuing Earnings $ 2,188 $ 1.03
2007 Discontinued Earnings $ - $ -
------------ ------------
2007 Net Earnings $ 2,188 $ 1.03
============ ============
2007 Continuing Earnings Excluding Special
Items $ 2,119 $ 1.00
2006 Continuing Earnings Excluding Special
Items $ 2,001 $ 0.95
% Change 5.9 % 5.3 %
ALTRIA GROUP, INC. Schedule 8
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Twelve Months Ended December 31,
($ in millions, except per share data)
(Unaudited)
Diluted
Net Earnings E.P.S. (*)
------------ ------------
2007 Continuing Earnings $ 9,161 $ 4.33
2006 Continuing Earnings $ 9,329 $ 4.43
% Change (1.8)% (2.3)%
Reconciliation:
----------------------------------------
2006 Continuing Earnings $ 9,329 $ 4.43
2006 Italian antitrust charge 61 0.03
2006 Asset impairment and exit costs 118 0.05
2006 Gains on sale of businesses (317) (0.15)
2006 Interest on tax reserve transfers
to Kraft 29 0.01
2006 Provision for airline industry
exposure 66 0.03
2006 Tax items (757) (0.35)
------------ ------------
(800) (0.38)
------------ ------------
2007 Asset impairment, exit and
implementation costs (452) (0.21)
2007 Recoveries from airline industry
exposure 137 0.06
2007 Interest on tax reserve transfers
to Kraft (50) (0.02)
2007 Tax items 251 0.12
------------ ------------
(114) (0.05)
------------ ------------
Currency 316 0.15
Change in shares - (0.02)
Change in tax rate (41) (0.02)
Operations 471 0.22
------------ ------------
2007 Continuing Earnings $ 9,161 $ 4.33
2007 Discontinued Earnings $ 625 $ 0.29
------------ ------------
2007 Net Earnings $ 9,786 $ 4.62
============ ============
2007 Continuing Earnings Excluding
Special Items $ 9,275 4.38
2006 Continuing Earnings Excluding
Special Items $ 8,529 4.05
% Change 8.7 % 8.1 %
(*) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings per
share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC. Schedule 9
and Subsidiaries
Condensed Balance Sheets
(in millions, except ratios)
(Unaudited)
December 31, December 31,
2007 2006
------------ ------------
Assets
--------------------------------------------
Cash and cash equivalents $ 6,498 $ 4,781
All other current assets 16,392 13,724
Property, plant and equipment, net 8,857 7,581
Goodwill 8,001 6,197
Other intangible assets, net 4,953 1,908
Other assets 6,447 6,837
Assets of discontinued operations - 56,452
------------ ------------
Total consumer products assets 51,148 97,480
Total financial services assets 6,063 6,790
------------ ------------
Total assets $ 57,211 $ 104,270
============ ============
Liabilities and Stockholders' Equity
--------------------------------------------
Short-term borrowings $ 638 $ 420
Current portion of long-term debt 2,445 648
Accrued settlement charges 3,986 3,552
All other current liabilities 11,713 10,941
Long-term debt 7,463 6,298
Deferred income taxes 2,182 1,391
Other long-term liabilities 4,627 5,208
Liabilities of discontinued operations - 29,495
------------ ------------
Total consumer products liabilities 33,054 57,953
Total financial services liabilities 5,603 6,698
------------ ------------
Total liabilities 38,657 64,651
Total stockholders' equity 18,554 39,619
------------ ------------
Total liabilities and stockholders' equity $ 57,211 $ 104,270
============ ============
Total consumer products debt $ 10,546 $ 7,366
Debt/equity ratio - consumer products 0.57 0.19
Total debt $ 11,046 $ 8,485
Total debt/equity ratio 0.60 0.21
Altria Group, Inc.
Nicholas M. Rolli, 917-663-3460
or
Timothy R. Kellogg, 917-663-2759
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